IORP under pressure
The European Insurance and Occupational Pensions Authority's (EIOPA) call for advice on the subject of revisions to the EU's 2003 IORP Directive on work-place-based pensions closes on 2 January 2012. It seeks advice on the extent to which the legislative framework should be similar to that for other financial institutions and products.
In particular, the call for advice asks whether the solvency and funding provisions in the revised IORP legislation should be similar to the Solvency II framework for insurance companies.
However, the call for advice could be interpreted in one of two ways: either as illustrating that the EU legislative authorities are at last making serious attempts to get on top of this tough subject; or that it is a delaying tactic due to its great length - 500-plus pages - giving the Commission more time to publish a firm proposal for an upgraded directive.
Furthermore, the call could be understood to be relieving severe pressures on staff at the directorate general (DG) for the single market. One professional drafter told IPE that she regularly works a 60-hour week.
The drafting pressure, which stems from the 2007-08 crisis and the recent establishment of a framework from the G20, has now become an overwhelming torrent - in the US, the Dodd-Frank package has already swelled to 26,000 pages, and is still growing. Consequently, IORP is having to take its turn among other priorities, which includes efforts to tighten up rules on insider trading, price manipulation, and measures to apply criminal sanctions in the Market Abuse Directive (MAD). Other activity includes work on the vast Solvency II package itself, due for implementation in 2013/14.
The 185,000 words of the document appear to be painstakingly thorough. One minor example discusses needs to amend article 84 in Solvency II in any transposition to IORP. Here the article requires undertakings to demonstrate to the supervisor - on request - the appropriateness of the level of their technical provisions and the applicability of the methods used. However, EIOPA states that this power already exists in the IORP Directive under Article 14.
The call for advice then spells out different policy options and their likely consequences.
EIOPA's own conclusion is that any anticipated impact could simplify life for the supervisory authorities, but with only a ‘minor' impact on IORP. The relevant text runs to 234 words of the 185,000.
The call deals with some complex issues including fairness to employees, notably those whose careers take them across EU borders, and the need to somehow skirt round irrationalities caused by the maze of widely varied work-place and social legislation across member states.
At the same time, a revised IORP Directive will have to play fair with the contradictory interests of insurance-based pension schemes. The European Insurance and Reinsurance Federation (CEA) is complaining that, from 2013, EU insurers providing pensions will be subject to the EU's Solvency II rules, the world's "state-of-the-art regulatory regime". But work-place-based pensions will continue under a "cruder old system".
This makes for a head-to-head clash of interests between the groups of pension providers. Facing the CEA are the European Federation for Retirement Provision (EFRP) and the European Association of Paritarian Institutions (AEIP). In the light of weakening state pensions, they are strenuously supporting provisions of second-pillar pension plans by employers. It is the unenviable task of legislators to reconcile the two opposing, but entirely reasonable, positions.
In the meantime, Sybille Reitz, EIOPA, tells IPE that the authority will eventually digest the new responses to from the stakeholders, and then advise the Commission appropriately. This will doubtless take some time. The Commission will carry out its own review of the IORP Directive to be published in the third quarter of 2012.